Switching jobs frequently is common, but it can come with a hidden cost: forgotten 401(k) accounts. According to a PensionBee analysis, leaving behind old retirement savings could cost you more than $90,000 by the time you retire. This happens because neglected accounts often get hit with high fees, don’t grow as fast, and can be difficult to track over time.
The Problem and the Price
The average American now changes jobs every few years, creating a risk of leaving a 401(k) behind with each move. These forgotten accounts can be a major drain on your nest egg due to several factors:
- High Fees: Small monthly fees, sometimes as little as $4.55, can add up to thousands of dollars over decades, eroding your savings.
- Stagnant Growth: Accounts left in “Safe Harbor IRAs” often prioritize security over growth, leading to low returns that can’t keep up with inflation.
- Lost Track: Over time, it’s easy to completely lose track of old accounts, making it impossible to manage them or benefit from their growth.
Simple Steps to Take Control
The good news is that you can easily reclaim your savings. When you leave a job, you have a few smart options for your old 401(k):
- Roll it over into your new employer’s 401(k).
- Transfer it to an IRA, which often gives you more investment options.
Cashing out is almost never a good idea due to hefty taxes and penalties.
To get started, simply contact your former employers or use tools like the Portability Services Network to locate old accounts. Consolidating your retirement savings allows you to simplify your finances, choose better, low-cost investments, and ensure your money is working as hard as possible for your future.
